Proposed Resolution 1 PUDs may support or oppose a ballot proposition (RCW 42.17A.) Commission considering a draft resolution In opposition of Initiative 1631 (Initiative) Resolution provided on website and as a handout Resolution is limited on impacts to District operations, costs, and electric system reliability
Public Hearing 2 Public Hearing Open Public Hearing Staff Analysis/Commission Comments Break Open public comment Approximately equal time “for” and “against” Initiative Questions about presentation Close public comment Close public hearing Consideration of Resolution by Board of Commissioners Commissioner discussion Including responses to questions about staff presentation Vote on Resolution (if taken)
Initiative 1631 3 The Protect Washington Act Impact Analysis on District Operations, Costs, Reliability
Introduction Staff’s Analysis 4 Focus is on impacts to the District and the electric sector We do not analyze impacts on other sectors of the economy The Initiative is complex Many hours devoted to understanding the Initiative and its impacts District’s methodology & results benchmarked with other utilities Emission factors deferred to rulemaking District required to make best-effort assumptions Presentation objective is to provide a full-scope overview Will not cover each slide in detail due to time limitations
Introduction How This Presentation is Organized 5 Context – District Power Supply Initiative & Impacts Overview Credits for Pollution Fees Paid Financial Impacts Carbon & the Electric Sector Staff Observations
Context – District Information 6
Context Overview Buying & Selling Power Simplified Example 7 Power Provided to Customers Power Purchase Contracts Excess Power Hourly/Daily Sales Balancing Power Markets
Context Benton PUD Load & Resources Annual – Based on Average Water Years 8 300 275 Wind/Packwood Frederickson CCCT 250 225 Average Water Year 200 175 BPA Slice Contract aMW Minimum Water Year 150 125 100 75 BPA Block Contract 50 25 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Block Critical Slice Average Slice Adder Renewables Frederickson Resource Requirement* * Retail Load Forecast plus distribution & transmission losses * CCCT – Combined Cycle Combustion Turbine
Context Benton PUD Load/Resource Balance Monthly – Average Water 9 Rely on Frederickson & Market Purchases 350 Energy surplus to meet load sold to market 300 Energy surplus sold to market 250 200 aMW 150 100 50 - January February March April May June July August September October November December Block Critical Slice Average Slice Renewables Frederickson 2018 Resource Requirement Block/Slice Generation observed over the last 3 years Frederickson available as energy call option through August 2022
Context Benton PUD Load/Resource Balance Daily Peak Hour by Month 10 t Blue = Surplus Red = Deficit Includes Frederickson
Overview 11
Initiative Measure No. 1631 12
Overview Initiative Overview 13 Pollution fee imposed on: Fossil fuels sold or used within the state. Electricity generated within or imported for consumption within the state. $15/ton beginning Jan. 1, 2020. Increases by $2/ton per year plus inflation. $2/ton increases stop once the state reaches its 2035 emissions goal, and is on a trajectory to meet 2050 goal, only inflation thereafter.
Overview Initiative Overview (continued) 14 For electricity, the fee obligation begins with the generator Can be assumed by the purchaser (e.g., utility) Asa federal entity, BPA cannot pay any fee In-state purchasers (utilities) must assume the obligation BPA to be assigned a default emission factor – unknown at this time Pollution fees put into special fund Used for designated purposes Utilities may “retain” fees paid, if spent in accordance with a plan Plan approved by: Department of Commerce for Consumer Owned Utilities (COUs) Utilities & Transportation Committee for Investor Owned Utilities (IOUs)
Overview Initiative Exemptions 15 Coal transition power (Centralia) Coal closure facility (e.g. Colstrip 1 & 2) Energy-intensive trade exposed (EITE) facilities Aircraft and maritime fuels. Diesel, biodiesel or aircraft fuels used for agriculture purposes. Other
Credits for Pollution Fees Paid 16 Utility Retained Fees
Utility Retained Fees Utility Retained Pollution Fees Opportunity to Claim Credit 17 Utility may claim credit for up to 100% of pollution fees paid Subject to development of a Clean Energy Investment Plan (CEIP) Must be approved by the Department of Commerce (for public utilities) In meaningful collaboration with the Board/Panels Credits must be reinvested in eligible projects Investments must be in addition to existing programs and expenditures necessary to meet emission reduction or conservation requirements Must describe a long-term strategy to eliminate any fee obligation on electricity and minimize any fee obligation on natural gas Must submit annual reports, and update plan every two years
Utility Retained Fees Initiative Governance: Public Oversight Board 18 Establishes a Public Oversight Board in the Governor’s Office 15 Voting members No dedicated utility representative Mandatory consultation with Advisory Panels
Utility Retained Fees Initiative Governance: Advisory Panels 19 Clean Air and Clean Energy: 9 members, representing tribal, environmental, business, labor and Pollution Health Areas (PHAs), expertise in carbon reduction. Co-chaired by 1 business interest, 1 representing statewide labor. Clean Water and Healthy Forests: No more than 9 members, represent tribal, environmental, business, labor and PHAs. Co-chaired by 1 Tribal leader, 1 representing statewide environmental interests. Economic and Environmental Justice: 2 labor members. 5 other members, of which at least 1 is Tribal leader, and at least 2 are non- Tribal leaders representing PHAs. Co-chaired by 1 Tribal leader, 1 representing PHAs that are not tribal.
AWB 20 Prepared by Association of Washington Business (AWB) https://washingtonstatewire.com/mc-mcaleer-discusses-the-complexity-of-washingtons-carbon-pricing-initiative/
Utility Retained Fees 21
Financial Impacts 22 Pollution Fees & Other Economic Impacts BPA Market Purchases 1. Benton PUD Market Purchases 2. Frederickson Operations 3. Secondary Market Sales 4.
Financial Impacts Financial Impacts 23 Financial impact areas 1) BPA Market Purchases 2) Benton PUD Market Purchases 3) Operation of Frederickson 4) Secondary Market Sales Benton PUD’s Sales BPA’s Sales Impacts include: Pollution fees paid Other economic impacts
Financial Impacts Uncertainty Relative to Financial Impacts 24 Benton PUD required to make key assumptions for analysis Default emission factors deferred to rulemaking BPA market purchases Benton PUD unspecified market purchases Impacts on market prices Impacts on the dispatch of Frederickson power plant Focus is on years 2020-2022 Greater uncertainty in out years
Financial Impacts Estimated Impact on Secondary Market Prices Affects Both Purchases & Sales 25 Mid-C Annual Average Market Price $31.00 $29.00 Key Assumption $27.00 $25.00 $23.00 Average Change in $21.00 Median Market Price of $1.40/MWh $19.00 $17.00 $15.00 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 No I-1631 I-1631 Source: TEA Aurora Modeling
Financial Impacts Impact Areas 26 Customers 1) BPA Market Purchases Allocated to Benton PUD 2) Benton PUD Market Purchases 3) Operation of Frederickson 4) Secondary Market Sales Contract through 2022 1 – Assumed to impact Block portion of BPA Contract
Financial Impacts 27 Pollution Fees & Other Economic Impacts BPA Market Purchases 1. Benton PUD Market Purchases 2. Frederickson Operations 3. Secondary Market Sales 4.
BPA Market Purchases 1) BPA Market Purchases Overview 28 BPA Fuel Mix (by percentage) 0.71% 11.15% 86.75% 1.23% BPA’s portfolio is predominantly hydro Some market purchases throughout the year BPA tracks their carbon emissions factor Registered with the California Air Resources Board as an Asset Controlling Supplier (ACS). Coal Hydro Natural Gas Nuclear Very low emissions factor due to hydro and nuclear BPA is ≈ 90% of Benton PUD power purchases Benton PUD assumes a proportional share of the resources in BPA’s portfolio Assumes a proportional share of BPA’s carbon content
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